Italy is currently in the hot phase of the election campaign, and the outcome of the 4th March vote could hardly be more closely contested. It is true that the opinion polls see the centre-right alliance spearheaded by Forza Italia (FI) and Lega Nord (LN) out in front, but this alliance could fail to secure an absolute majority and would then have to look around for coalition partners. What is more, the alliance between the parties on the right is by no means as stable as the party bigwigs were claiming it to be when they initially joined forces. Where Forza Italia is mainly attempting to give the impression of being reliable and representing the state, Lega Nord is endeavouring to curry support on the right-wing fringe of the spectrum, presenting itself as a classic right-wing-populist grouping. For example, LN President Salvini has repeatedly flirted with the idea of Italy leaving the euro project and has savagely criticised the EU in its present form, arguing that Italy must no longer remain the slave of Berlin or Brussels. The verbal escalation on the part of the LN by no means suits Berlusconi, who himself views an Italexit as a “catastrophe.” Both partners even recently cancelled a joint election campaign event at the last minute.
On the other hand, a glance at the opinion-poll readings reveals a possible reason for this spat. Where it looked for a long time as though the FI was a step ahead within the centre-right alliance, the most recent poll results are tending to point to a neck-and-neck race. The FI is mainly being hurt by the fact that its figurehead, Berlusconi, who has a dominant impact on the way the party is perceived by the general public, is banned from holding public office because of a tax-fraud conviction. Salvini is therefore suddenly sensing that there is a good chance of his party becoming the strongest force in the alliance and that he can therefore lay claim to the post of prime minister himself. Were this scenario to materialise, the country would presumably be turned upside down politically. The FI would not have expected to only play second fiddle within the alliance; nor would such a turn of events probably make coalition talks with the Social Democrats (PD) any easier. It is true that the FI and the PD ought to exert a moderating influence on the LN in the everyday political arena, but Salvini may still have a decisive bargaining counter up his sleeve. If the talks break down, the LN might reach out to the Five Star Movement (M5S), which also has a populist alignment. The role model here would ironically be crisis-ridden Greece, which has been governed since 2015 by a coalition of left-wing and right-wing populists . Different as the LN and the M5S are, they are united by their rejection of the EU and the European Monetary Union in their present form. From an investor’s point of view, such a coalition would be the worst of all possible political constellations. To date, the markets have tended to adopt a relatively relaxed attitude towards the forthcoming elections, partly because it has been assumed up to now that the investors‘ bugbear, the M5S, has hardly any chance of playing a role in the new government. If the tide turns, many investors may well find themselves caught on the wrong foot. Joy about the economic recovery which is gaining momentum in Italy as well could abruptly subside into concern about the political future of the boot-shaped peninsular.